Insurance and Risk

It’s interesting to note how many academic subjects end up being used in practical applications without most people being aware of what they’re actually doing. For example, you can look at subjects like mechanical engineering for example; where people who drive cars have no idea what’s going on beneath the bonnet.

Another similar subject, is finance, particularly in the world of insurance. Insurance is really all about managing some sort of risk. The formal disciple, called risk management, has evolved into a practice where organisations recognise and measure the level of risk they are exposing themselves to, and put in place plans for avoiding, mitigating or absorbing that risk. But this also effects each and every one of us in a simple form. I’m thinking about taking out a car or bike insurance policy. What this does is pass on the risk of some unforeseen event from yourself to the insurance company who has the financial backing to be able to deal with that sort of eventuality. The insurance company collects premiums from people who want to be covered and uses these to foot any claims that may arise. Premiums are calculated by measuring the risk that your policy covers, which is really a function of the likelihood and the financial cost of one of a set of events happening.

It’s quite fascinating to see the different flavours of insurance available to people. I was looking through the FAQ page on the Autonet Insurance website just to get an idea of what is available. They claim to be the country’s largest independently owned insurance brokers and have a huge selection of different insurance policies on offer (including quad-bikes which is cool). Must bookmark them for future reference.